Investors interested in Utility - Electric Power stocks are likely familiar with DTE Energy (DTE) and WEC Energy Group (WEC). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both DTE Energy and WEC Energy Group have a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
DTE currently has a forward P/E ratio of 18.95, while WEC has a forward P/E of 20.54. We also note that DTE has a PEG ratio of 2.48. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. WEC currently has a PEG ratio of 2.95.
Another notable valuation metric for DTE is its P/B ratio of 2.39. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, WEC has a P/B of 2.56.
These are just a few of the metrics contributing to DTE's Value grade of B and WEC's Value grade of C.
Both DTE and WEC are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DTE is the superior value option right now.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
